The Ministry of Corporate Affairs has launched the Companies Fresh Start Scheme,2020. The reason to introduce a new scheme is to deliver relief to law-abiding companies & LLPs i.e. Limited Liability Partnership. Also, MCA revised the “LLP Settlement Scheme, 2020”. This is the third time, when the Government proposes such kind of scheme/opportunity on the demand of various stakeholder, as in the year of 2014 and 2018, the Ministry had previously proposed such kind scheme with different names like Company Law Settlement Scheme, 2014 and CODS Scheme 2018. Both the schemes incentivize agreement and decrease assent burden during the difficult time’s public health situation made by the explosion of COVID-19.
What is the Companies Fresh Start Scheme,2020?
The new scheme CFSS-2020 is initiated for an initial period of 6 months i.e. 01.04.2020 till 30.09.2020. As per the mentioning in its General Circular No.12/2020 on the 30th of March 2020. This is an opportunity for all defaulted companies along with inactive companies to file all overdue documents as freshly started documents, not including any additional fees.
Hereby Defaulting company means a company established under the Companies Act, 2013. That has caused a default in filing of any of the documents, statements, returns, etc. That also includes annual statutory documents (AOC-4 & MGT- 7) on the MCA-21 registry on due time.
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Inactive Company means a company which has not been carrying on any marketing or operation or has not made any important accounting transaction throughout the last 2 financial years. Also, the companies that have not filed financial statements and annual returns during the last 2 financial years.
Both of them have a great opportunity to do so.
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Important Definitions Under the Scheme
- “Act” means the Companies Act, 2013 and Companies Act, 1956 (where ever applicable);
- “Company” means a company as described in clause (20) of section 2 of the Companies Act, 2013.
- “Defaulting company” means a company established under the Companies Act, 2013, and which has created a default in filing of any of the documents, statements, returns, etc including annual statutory documents on the MCA-21 registry.
- “Designated authority” means the Registrar of Companies (ROC) having control over the registered office of the company.
- “Immunity certificate” means the certificate is issued by the DA after getting into consideration the declaration made in the Form CFSS-2020.
Eligibility Under the Scheme
This Scheme applies to any “Defaulting Company”. It shall be initiated from 01st of April, 2020 till the 30th of September, 2020. In this all the mentioned people are allowed to file all overdue documents which were due for filing without any Extra Fees except 2 documents and out of which, some permitted documents are as follows:
- Annual based Forms:
- Annual Return -MGT-7
- Financial Statements – AOC-4
- Event-based Forms:
- INC-22A (Active Company Tagging Identities and Verification (ACTIVE))
- INC-20A (Declaration for the start of business)
- PAS-3 (return of Allotment)
- ADT-1 (Appointment of Auditor)
- MGT-14 (Enrolling of Resolutions and agreements to the Registrar)
- DIR-12 (Details of appointment of Directors and the important managerial personnel and the differences among them).
- Two Exceptions which is out of the purview of this Scheme:
- Increase in Authorised Share Capital (SH-7)
- Charger related documents (CHG-1, CHG-4, CHG-8, and CHG-9)
Conditions Under Which CFSS-2020 isn’t Applicable
CFSS-2020 must not apply under the following cases:
- ROC has previously issued the Final Notice for striking off the Company’s name under Section 248 of Companies Act, 2013.
- The Company has registered an Application STK-2 for striking off its name with ROC.
- Companies merge under the Compromise and Arrangement Scheme.
- A Company that has involved to get dormant status under Section 455 of Companies Act, 2013, prior to the CFSS-2020 scheme introduction.
- Vanishing Companies
- Companies having a pending appeal before the Court of Law.
- Companies with management conflict pending before Tribunal or Court.
- A Company that was condemned by the Court and no appeal was favored upon such order of the Court before CFSS-2020 came into force.
- A Company that was condemned by an Adjudication Authority and no appeal was favored upon it before CFSS-2020 came into effect.
Manner of payment of a normal fee for the filing of overdue documents and soliciting immunity under the Scheme –
All defaulting companies must need to pay normal fees as directed under the Companies (Registration Offices and Fee) Rules, 2014 on the date of filing of all late documents and no extra fee shall be payable. Immunity from the launch of prosecution or proceedings for imposing a penalty shall be given only to the extent such prosecution or the proceedings for imposing a fine under the Act concern to any delay linked with the filings of overdue documents. Any other important proceedings, including any proceedings including interests of any shareholder or any other person qua the company or its directors or key managerial staff, would not be included by such immunity.
Withdrawals appeal if any
Withdrawal of appeal upon any prosecution launched or the procedures for forcing penalties initiated- If the defaulting company, concerning any statutory filing under the Act or its officer in default. As it has filed any appeal upon any notice circulated or complaint filed or an order given by a court or by an adjudicating authority under the Act. Before a competent court or authority for disrespecting of the provisions under the Companies Act, 1956 of Companies Act, 2013. In respect of that, the application is made under this scheme, the candidate shall before applying to issue of immunity certificate, withdraw the appeal and provide proof of such withdrawal along with the application.
If an application is registered upon any notice, complaint or order before any competent authority by the defaulting company or its officer in default, then such applications are to be withdrawn by the candidate before filing any application for immunity certificate and provide the proof of such withdrawal along with the application.
Specific measures for situations where the order of the adjudicating authority was passed but the appeal could not be filed-
As on the date of start of the Scheme, the following would apply:-
- Where the closing date for filing the appeal upon the order of the adjudicating authority under section 454(6) falls within the 1st March 2020 to 31st May 2020. A period of 120 extra days shall be allowed with effect from such an end date to all companies and their officers for applying the request with the concerned Regional Directors.
- During such extra period as stated in point 1, prosecution under section 454(8) for non-compliance of the order of the judicial authority, insofar as it links to delay linked in the filing of any document, statement or return, etc in the MCA-21 registry must not be launched against such companies or their officers.
Application for Issue of Immunity
Application for issue of immunity in respect of document(s) filed under the Scheme- The application for getting immunity in respect of overdue documents filed under the Scheme may be made electronically in the Form CFSS-2020. After the closure of the Scheme and after the document(s) arc taken on the file, or record or authorized by the Designated authority as the case may be but not after the expiry of 6 months from the date of closure of the Scheme. There must not be any fee payable on this Form.
Given that this immunity shall not be relevant in the matter of any appeal pending before the court of law. In case of control disputes of the company pending before any court of law.
Also, given that no immunity must be rendered in case any court has settled belief in any matter, or an order forcing penalty has been passed by a judicial authority under the Act, and no appeal has been favored upon such orders of the court or the judging officials, as the case may be before this Scheme has evolved into power.
Order by the Selected Authority Giving Immunity From Penalty and Prosecution –
Based on the statement made in the Form CFSS-2020, an immunity certificate in respect of documents registered under this Scheme must be circulated by the nominated authority. The immunity certificate must be allotted by the DA after taking into consideration the declaration given in the Form CFSS-2020.
Effect of Immunity
After giving the immunity, the Nominated authority involved must withdraw the prosecution pending, if any, before the concerned Court and the proceedings of adjudication of fines under section 454 of the Act. In respect of errors upon which immunity has been so given shall be deemed to have been completed without any additional action on the part of the Designated Authority.
- Condonation of all Extra fee for the filing of Overdue documents.
- Giving of Immunity from the Prosecution.
- Allowing of Immunity from the Proceedings for forcing a fine.
- ROC must withdrawal all proceedings of adjudication of fines u/s 454.
Scheme for Inactive Companies-
The defaulting inactive companies, while registering due documents under CFSS-2020 can, together, either:
- Appeal to get themselves listed as Dormant Company under section 455 of the Companies Act, 2013 by registering e- form MSC-1 at a normal fee on said form.
- Appeal for striking off the name of the company by registering e-Form STK-2 by giving the fee payable.
Provisions of CFSS, 2020:
- Under the CFSS 2020 scheme, any company which has left to file the Annual Returns and Financial Statements or any return or form which are administered under section 403 of the Act. Then such defaulting companies can register such overdue documents in the MCA-21 registry at a nominal fee as directed under the Companies (Registration and Office) Rules, 2014 with the ROC. During the currency of the CFSS 2020 i.e. with impact from 1st April 2020 to 30th September 2020.
- The defaulting stable companies can also together apply for getting dormant status under the terms of section 455 of the Act. Even apply for resisting off the name of the company by filing e-form STK-2, by giving the normal fees as applicable under the Act.
- On the finish of CFSS 2020 on 30th September 2020, CFSS-2020 e-form will be available for filing for companies availing benefit under the scheme and an immunity certificate will be circulated by the MCA.
- The CFSS 2020 does not apply to companies stroke off by ROC under section 248.
It’s a great opportunity for all the defaulters to refer to this scheme for their betterment and the demand for stakeholders this scheme was introduced by MCA. For more updates, stay connected with LegalPillers.